Car Loan Interest Rates Continue To Decline

The interest rates on car loans in Laos have dropped as people are being urged to buy cheaper vehicles in future.

Indochina Bank, one of the major banks which provides loans for car buyers in Laos, has announced a cut in interest on vehicle loans from 0.85 percent per month to 0.79 percent since early this month as one of its promotional campaigns to attract people who are looking for new cars.

Some of the commercial banks which provide car loans have even lowered their interest rate on car loans to 0.75 percent as one of their business strategies in the face of stronger competition in the country. A number of small micro finance institutes which also provide vehicle loans have cut their interest rate from 1.50 percent a month to only 0.85 percent.

The decision by the commercial banks and financial institutes in Laos to lower car loan interest was taken in the light of the increasing number of leasing firms in the country. At present the major leasing firms are BCEL, Indochina Bank, Lao-Viet Bank and Thanasup.

There are more than 31 commercial banks in Laos, most of which are foreign branches, who have decided to invest in the country after exploring the business opportunities thanks to the strong economic growth of more than eight percent over the past two years.

Krungsri Consumer, an unsecured loan provider under the Bank of Ayudhya (BAY) announced last month that it plans to start an auto and personal loan joint venture in Laos in July amid a surge in demand for unsecured vehicle loans.

Krungsri Consumer Managing Director, Mr Thakorn Piyapan, said that Laos had a population of only 6.4 million people and GDP growth that is smaller than Thailand’s, but the country has high growth potential amid fast economic development.

Car dealers said that the drop of the car loan interest rate was not only due to the increasing number of firms offering car loans but also a lower demand for cars in Laos .

The demand for cars in Laos has been dropping since early this year after reaching a peak over the past two years. Most of the middle income people have purchased their cars, they said.

According to a report from the Ministry of Public Works and Transport, the number of vehicles in Laos has reached more than 1.5 million units. In Vientiane, the number of vehicles is about 500,000 units while the population of the capital is only 800,000.

Observers said that car loan interest rates and the price of vehicles in Laos would continue to drop. At present, some of the car dealers offer customers one year’s free interest as part of efforts to boost their sales.

The price of the Vigo, one of the popular Japanese brand name cars, has dropped from US$40,000 to US$37,000 while the price of an Isuzu Demax has dropped from US$35,000 to US$32,000.

published with the permission of Vientiane Times